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2022 (4) TMI 1278 - AT - Income TaxTDS u/s 194C or 194I - default u/s. 201(1) - short deduction of TDS - Payment of common area maintenance charges (CAM charges) - whether the rent and maintenance which are paid as part of single agreement is liable to be deducted tax at source at the same rate of 10% u/s. 194I? - HELD THAT - As per clause 9 of the lease agreement (pages 62 of paper book) makes it clear that the maintenance charges paid are not paid for use of land/building to fall within the ambit of the definition of rent u/s. 194I. The CAM charges are in the nature of contractual payments towards electricity, water supply, security, lift maintenance etc., falling within the meaning of section 194C whereby these charges are paid for carrying out the work for maintenance of the common area that are available along with the lease premises. The fact that these two payments are agreed and paid under the same agreement does not change the character / nature of such payments warranting single rate of tax deduction at source. The law has provided for different rates of tax deduction at source based on the nature of payment and it is imperative that the correct rate of tax is applied depending on the nature of payments. We are of the considered view that the payments made towards CAM charges are in the nature of contractual is payments that are made for availing maintenance services and they are not paid for use of any premises/equipment. Therefore the cam charges would be subjected to deduction of tax at source u/s. 194C of the Act at 2%. The assessee has applied the right rate of tax for deduction at source at 2% on CAM charges and therefore the assessee cannot be held to be an assessee in default u/s. 201(1) of the Act. We therefore allow the appeal in favour of the assessee
Issues Involved:
1. Whether the order passed by the AO is time-barred under Section 201(3) of the Income Tax Act, 1961 for the assessment years 2013-14 and 2014-15. 2. Characterization of Common Area Maintenance (CAM) charges as rent and the applicable TDS rate. 3. Levy of interest under Section 201(1A) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Time-barred Order under Section 201(3): The assessee contended that the order passed by the AO under Section 201 of the Income Tax Act, 1961 dated 18 February 2020 was barred by time as per the erstwhile provisions of Section 201(3) of the Act as it stood prior to the Finance Act 2014. The CIT(A) and AO failed to appreciate that the amendment via Finance Act 2014, which extended the time limit to pass an order under Section 201 of the Act, is effective from 1 October 2014 and should be applied prospectively. The Tribunal agreed with the assessee, stating the time limitation for passing an order under Section 201(1) deeming the assessee as an assessee-in-default could have validly been done within a period of 2 years from the end of the financial year in which the statement under Section 200 was filed by the assessee. Therefore, the order passed under Section 201(1)/201(1A) for these assessment years on 18.02.2020 is clearly beyond the time limit as per clause (i) of Section 201(3). 2. Characterization of CAM Charges and Applicable TDS Rate: The assessee argued that CAM charges are contractual payments for services like electricity, water, lift maintenance, etc., and should be subject to TDS under Section 194C at 2%, not as rent under Section 194I at 10%. The Tribunal noted that the CAM charges paid by the assessee were for availing maintenance services and not for the use of any premises/equipment. The Tribunal relied on the decision of the Delhi Bench of the Tribunal in the case of Connaught Plaza Restaurants P. Ltd. Vs DCIT, where it was held that CAM charges are liable for deduction of tax at source under Section 194C at 2%. Thus, the Tribunal concluded that CAM charges paid by the assessee were rightly subjected to deduction of tax at source at 2% under Section 194C, and the assessee could not be held to be an assessee in default under Section 201(1) of the Act. 3. Levy of Interest under Section 201(1A): Since the Tribunal quashed the order passed by the AO under Sections 201(1)/201(1A) of the Act both on legal grounds that the order is barred by limitation and on merits stating that the assessee could not be held to be an assessee in default, the interest charged by the AO under Section 201(1A) was rendered infructuous. Therefore, the ground raised by the assessee on this count was dismissed as it did not require separate adjudication. Conclusion: The Tribunal allowed the appeals of the assessee for the assessment years 2013-14 to 2017-18, quashing the orders passed by the AO under Sections 201(1)/201(1A) as time-barred and on merits, holding that CAM charges should be subjected to TDS at 2% under Section 194C, not at 10% under Section 194I. Consequently, the levy of interest under Section 201(1A) was also dismissed.
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